Government tenders trap intellectual property

Many government bodies are becoming more aggressive in relation to the ownership of intellectual property (“IP”) in projects they are funding. This impacts on anyone who creates IP for the Government and, in particular, the pricing of that work.

Developers of IP often expect to be able to reuse the materials they developed for one client on their next project so need to retain control over how those materials are used. This is done by granting the client a non-exclusive license to use the 

Copyright (one of the most common IP rights) can only be transferred in writing. Assignment of copyright frequently results in the developer of the materials retaining ownership of the copyright, while the client who commissioned the work is granted a licence to use the materials.

A consequence of this is that developers generally expect an initial job to generate further work for them. This directly affects the cost they quote for the work, in that the initial development can be for little profit so long as the materials can be reused for a profit with later clients.  Government tenders are increasingly moving away from this approach .

The OIC’s newsletter suggests that government departments are now acquiring outright ownership of the IP which they commission, then outsourcing the operation of the IP to third parties and prohibiting the developer from dealing with the IP in any way. This clearly has a significant impact on the developer’s ability to derive alternative profits from their work, and therefore needs to be carefully considered in pricing the work to be undertaken.

Government tenders dealing with IP in this manner may be of concern to businesses responding to the tenders. Businesses participating in the tender process need to be very clear about the IP provisions stipulated by the tender documents, and ensure that they are pricing their work accordingly.

As a more general caution, they should also carefully consider whether they are using any third party materials for which they do not hold the IP rights and that may put them in breach of the IP warranties, which are customary in such tenders.

Should you find yourself in this position, reconsider the value of the IP developed including the ongoing value to the client if you do not retain the copyright, and appropriately price or otherwise licence the copyright.